Investors Aren't Entirely Convinced By Zepp Health Corporation's (NYSE:ZEPP) Revenues
With a price-to-sales (or "P/S") ratio of 2x Zepp Health Corporation (NYSE:ZEPP) may be sending bullish signals at the moment, given that almost half of all the Electronic companies in the United States have P/S ratios greater than 2.6x and even P/S higher than 6x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.
See our latest analysis for Zepp Health
How Has Zepp Health Performed Recently?
With revenue growth that's inferior to most other companies of late, Zepp Health has been relatively sluggish. The P/S ratio is probably low because investors think this lacklustre revenue performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.
Want the full picture on analyst estimates for the company? Then our free report on Zepp Health will help you uncover what's on the horizon.Do Revenue Forecasts Match The Low P/S Ratio?
In order to justify its P/S ratio, Zepp Health would need to produce sluggish growth that's trailing the industry.
If we review the last year of revenue growth, the company posted a worthy increase of 12%. Still, lamentably revenue has fallen 65% in aggregate from three years ago, which is disappointing. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.
Looking ahead now, revenue is anticipated to climb by 27% during the coming year according to the sole analyst following the company. That's shaping up to be materially higher than the 16% growth forecast for the broader industry.
With this in consideration, we find it intriguing that Zepp Health's P/S sits behind most of its industry peers. It looks like most investors are not convinced at all that the company can achieve future growth expectations.
The Bottom Line On Zepp Health's P/S
While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.
Zepp Health's analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. When we see strong growth forecasts like this, we can only assume potential risks are what might be placing significant pressure on the P/S ratio. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.
Having said that, be aware Zepp Health is showing 2 warning signs in our investment analysis, you should know about.
If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.